Will There Be Another Rate Cut Next Week?

Greg Ip says:

The Federal Reserve is likely to cut its short-term interest rate by a quarter of a percentage point next week -- but then may be ready for a breather. ... If it does cut rates, the Fed could signal in the statement accompanying the decision an inclination to pause and assess the impact of its cuts ...

And, in his most recent Fed watch, Tim Duy says:

I suspect the cessation of rate cuts is near at hand. The Fed will likely pull the trigger on another 25bp at the next FOMC meeting, and send a signal that they intend to pause soon.

Comments

[a]

So why is the Fed cutting rates? Other thant to pretend it is doing something?

Methinks the Fed cutting rates and its bailout of BS has just a little to do with the dramatic increase in prices in foodstuffs, as people lose confidence in the dollar and search for hard money (i.e. things). Now of course people who advocated cutting rates and bailing out BS will say that the consequence of people starving wasn't intended and they will wash their hands. As if.

[kharris]

Janet Yellen has expressed concern over inflation, in what appears to be near balance with concern over growth. When the doves are in what was formerly the middle, the balance of the Board is shifting. So yeah, the Board is ready to take a break.

[hari]

In aftermath of G-7 and IMF/IBRD meetings in Wash D.C. I suppose you're witnessing a collaborative effort now - specially across the Atlantic - to come to grips with the financial crisis and specially the highly leveraged banking sector. Even if you don't read a lot about the goings-on, just take a look at what USB and RBS just did to recover their solvency: new capital injection in billions! My understanding (still) that Fed will try to go close to 1% and protect the credit markets, as first priority. Inflation is a secondary issue for Fed - NOT for ECB/BoE/Canada....

[kharris]

Hari,

What does "understanding" mean in this context? As in "My understanding (still) that Fed will try to go close to 1%...."

[hari]

You've to go back to BB last appearance on the Hill and the q's was raised in connection with credit markets.

[ampersand]

http://blogs.telegraph.co.uk/business/ambrosevanspritchard/april2008/thisbeargrowlson.htm

"The cuts are heavenly manna for the banks. These miscreants can now play the "steepening yield curve", using their monopoly privileges to borrow cheaply from the US Government and lend back expensively to the same US Government on long-dated bonds. This is the time-honoured method for rebuilding balance sheets. It works wonders. Even better (from the banks point of view), few people are aware of this massive bail-out."

Bernanke is actively assisting the crony capitalists and pigmen to feed at the public trough. When will this traitor and crook be put on trial?

[TigerPaw]

Ben will be in the dock the day after the US public comes to its senses and puts Bush and his friends in the dock for war crimes.

That is to say, never. They don't have the moral fibre anymore to do what needs doing.

[Eric Dewey, Portland OR]

Bernanke and the Board could send a message about their own credibility by standing pat.

The message if they continue dropping rates may be that there's more scary stuff out there and they still think banks need the additional room to rebuild capital.

Which would scare the markets more: not getting another rate decrease, or getting another rate decrease that just proves that rate decreases aren't working?

We are getting close to a point where dropping rates further will be seen as being scarier than leaving them alone, and not simply because of inflation.

[Spectator]

CYA behavior would predict a quarter point cut. They have to be seen to be doing something about the recession, and look mindful of inflation, which is more of a problem in poor countries.

Perhaps this is what end of empire looks like, where the incompetents in charge look to fail conventionally. For the next few years we can expect something akin to Japan's deflation, combined with rising prices of real and imported goods. Longer term, the UK decline may provide insights into our future.

[No business]

What to do? All so confusing, what dose this mean for the regular Joe? Gotta convert a loan in 5 weeks or so should we lock the rate before the fed meets or let it ride out hoping the big men in charge take pitty on us everyday folks?